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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 1, 1999
ADVANCED FIBRE COMMUNICATIONS, INC.
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A Delaware Commission File I.R.S. Employer
Corporation Number: 0-28734 Identification No.
68-0277743
One Willow Brook Court
Petaluma, California 94954
Telephone: (707) 794-7700
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ITEM 5. OTHER EVENTS.
In August 1999, Cisco Systems, Inc. ("Cisco"), a publicly-traded company,
announced its intentions to acquire a privately-held company in which we held
an approximate 5% equity interest, Cerent Corporation ("Cerent"). On November 1,
1999, in connection with the acquisition, we exchanged our Cerent stock for
approximately 5.3 million shares of Cisco common stock. We recorded a gain of
approximately $379 million on the exchange as a result of the step-up in basis
to the market value of Cisco stock received. This gain will be reflected in our
results of operations for the fourth quarter of 1999 as non-operating income.
The Cisco stock is classified as available-for-sale. At the end of each quarter,
we will record a net unrealized gain or loss on the stock held in the
stockholders' equity section of our balance sheet, to the extent the market
value differs from the carrying value of the stock. Upon sale of a portion or
all of this stock, we will recognize a gain or loss in our results of operations
as non-operating income or loss.
The relative market price of Cisco stock in future quarters, as compared with
the closing market price at November 1, 1999, may result in material
fluctuations in our marketable securities portfolio, unrealized gains or losses,
and realized gains or losses upon disposal. We have not yet determined when or
to what extent we will attempt to reduce the economic risk of ownership of this
stock. Our ability to do so may be limited, in part due to contractual transfer
restrictions that we anticipate will expire in the first quarter of calendar
year 2000. We also expect that Cisco's stock price will fluctuate, perhaps
significantly. Accordingly, we cannot predict the timing of any disposition of
our Cisco stock, the value that we will ultimately realize from this stock, or
the effects on our results of operations and liquidity in future periods.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADVANCED FIBRE COMMUNICATIONS, INC.
Date: November 5, 1999 By: /s/ Karen L. Godfrey
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Name: Karen L. Godfrey
Title: Vice President, Chief
Financial Officer, Corporate
Controller, and Assistant
Secretary
(Duly Authorized Signatory
and Principal Financial
Officer)
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